Midlantic National Bank v. New Jersey Department of Environmental Protection

Quanta Resources Corporation (Quanta) (debtor) processed waste oil at facilities in Long Island City, New York, and Edgewater, New Jersey. In June 1981, Midlantic National Bank loaned Quanta $600,000 secured by its assets. That same month, the New Jersey Department of Environmental Protection (NJDEP) discovered Quanta had accepted more than 400,000 gallons of oil contaminated with polychlorinated biphenyl (PCB) at its Edgewater facility in violation of its permit. Quanta began negotiating a cleanup, then filed bankruptcy. An investigation revealed Quanta had also accepted over 70,000 gallons of PCB-contaminated oil at the Long Island City facility. Because the mortgages exceeded the property value, the cost of disposing the waste oil made the property a burden to the estate. When the trustee gave notice of intent to abandon the property, Long Island City and New York (collectively New York) objected, contending abandonment would threaten public health and safety and violate environmental laws. New York asked the court to order the trustee to use estate assets to clean up the facility. The court nonetheless approved abandonment, reasoning that the city and state stood in a better position to protect the public from the dangers the PCB-contaminated facility posed, and the district court affirmed. That meant New York had to decontaminate the facility at a cost of $2.5 million. Shortly afterward, the bankruptcy court also approved abandonment of personal property consisting mostly of contaminated oil at the Edgewater site, despite NJPED’s objection that the estate had enough funds for cleanup. New York and the NJDEP appealed, and the Third Circuit reversed. The Supreme Court granted review.